Tesla Energy Storage Is Win-Win For Both Sides Of The Meter

Tesla installed a microgrid of 5,328 solar energy panels and 60 Powerpacks to power the island of Ta’u in American Samoa — offsetting more than 109,500 gallons of diesel per year (Source: Inhabitat)

TESLA ENERGY: HERE’S WHY GRID STORAGE WILL BE HUGE – ON BOTH SIDES OF THE METER

Battery prices are falling faster than even the most optimistic observers had predicted. Battery pack costs have sunk from $1,000 per kilowatt-hour in 2010 to less than $230 per kWh in 2016, according to a recent report from McKinsey.

Historically, battery advances have been driven by the consumer electronics market. However, growing demand for electric vehicles is now adding to the downward pressure on prices. And as prices plummet, battery storage is being used more and more in electrical grid applications.

According to Lux Research, transportation and stationary applications will soon become the largest storage markets. Lux predicts that, by 2025, the energy storage market will top $100 billion, and the highest growth rate will be in stationary storage for the electrical grid.

The McKinsey report found that it’s already economical for many commercial customers to use battery storage to reduce their peak electricity consumption. Storage is also starting to play a broader role in energy markets, expanding from niche uses such as grid balancing to broader ones such as replacing conventional power generators for reliability, providing power-quality services, and supporting the integration of renewable sources.

Meanwhile, battery storage combined with solar panels is becoming an attractive option for consumers in many markets, where electric utilities, aided by compliant regulators, are rolling back incentives and introducing new fees in attempts to stem the growth of rooftop solar.

Combining solar with storage enables households to generate and consume their own power on demand, instead of exporting it to the grid, a practice sometimes referred to as partial grid defection. McKinsey believes this phenomenon will continue to expand, further eroding demand for utility-provided electricity.

However, energy storage has many applications and, for utilities, it presents not only problems but opportunities. Cheap battery storage “behind the meter” (that is, located at a home or business) is considered a challenge for utilities. But “in front of the meter,” storage is a great asset for utilities, which use it for a variety of grid-regulating functions.

Tesla Powerwalls at Mira Loma substation can store 80 megawatt-hours, enough energy to power more than 2,500 households for a day (Source: Inside Edison)

A major front in the battle between utilities and consumers who have rooftop solar is net energy metering (NEM), a policy that allows consumers to sell excess power back to the grid at retail rates. NEM is a powerful incentive for consumers to install solar panels, but from the utilities’ standpoint, it’s a raw deal. As more customers produce their own energy, rates must increase for the rest, as there are fewer ratepayers to cover the fixed investment in the grid, which provides backup reliability for everyone, including the solar customers (at least, that’s the way utilities see the issue – solar advocates don’t tend to agree).

One way utilities have responded to the growth of rooftop solar is by reducing NEM rates (or trying to do so – their ability to set rates is constrained by state regulatory agencies, which struggle to balance the conflicting interests of utilities and consumers). However, the lower the cost of storage, the less effect NEM rates are likely to have on consumer behavior. This is because adding storage allows customers to shift solar generation away from exporting to the grid and toward supplying more of their own electricity needs.

As McKinsey sees it, the variable rate structure used today, whereby consumers pay for the power they use, is a historical construct that may not serve us well in the future. “The grid is a long-lived asset that is expensive to build and maintain… imposing fixed fees could ensure that everyone who uses the grid pays for it. As more and more customers generate their own energy, access to the grid for reliability and market access becomes more valuable than the electrons themselves.”

Some utilities are responding to the new market realities by experimenting with new business models. In Australia, utilities are becoming solar-and-storage installers. In the US, one pilot program is selling analytics and data-management services to consumers to help them manage their energy use.

Whichever side of the meter it’s on, storage is rapidly emerging as a key enabling technology that will finally allow renewable energy to come into its own. In a new report called “An Underappreciated Disruptor” (via Forbes), Morgan Stanley analysts Stephen Byrd and Adam Jonas argue that the price of solar and wind energy, as well as battery storage, have reached the point where renewable energy can finally become a dependable rather than an unpredictable source.

Byrd and Jonas point out that peak electricity usage tends to occur in the early morning and evening, whereas peak production time is midday for solar energy and nighttime for wind. Affordable storage eliminates this dilemma, and with it much of the need for expensive gas-fired “peaker” plants.

An optimal way to use solar with battery backup is to charge during peak times and then use the stored electricity when needed (Image: Let’s go solar)

Morgan Stanley predicts that annual demand for storage will grow to as much as $4 billion in the next couple of years, and that installed storage capacity will grow to some 85 gigawatt-hours.

Naturally, there will be winners and losers. Operators of gas-fired plants will be among the latter.

“Storage effectively provides a low-cost source of power, eliminating the need for the highest cost, least efficient conventional power plant,” write Byrd and Jonas. The winners will be companies that sell storage units, such as Tesla, and utilities will be their biggest customers. “We think utilities could deploy storage as a way to enable the growth of renewables and/or defer costly transmission and distribution projects.”

Two recently announced projects highlight the growing application of storage as a complement to renewable energy. According to Nikkei Asian Review, the Taiwanese government is planning to approach Tesla to discuss setting up battery facilities for storing renewable energy, inspired by the company’s highly publicized recent storage projects in Australia. The island nation has recently suffered some embarrassing power blackouts, and President Tsai Ing-wen has pledged to make Taiwan nuclear energy-free by 2025. “Tesla is using its lithium-ion battery technology to help Australia and California to implement smart grid and grid storage, and we can learn from them in the future,” said Minister of Science and Technology Chen Liang-gee.

Above: Another revealing case study of Tesla Powerpack’s ability to store clean energy generated from solar during the day to power buildings at night — shown at Australia’s Cathedral College in Rockhampton, Queensland (Source: Tesla)

Meanwhile, Electrek reports that big box retailer Home Depot has announced plans to install GE solar panels at 50 of its US stores. Six of those stores will also deploy Tesla Powerpacks. The new initiative will convert the chain’s rooftops into “solar farms,” said the company, noting that its average store has a rooftop of around 104,000 square feet, “meaning there’s 104,000 square feet of empty space sitting on top of each one.”

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers. Our thanks go out to EVANNEX, Check out the site here.

If the storage is grid-controlled, I think that’s a reasonable policy.

But overall, residential solar is stupid. For the same money, medium and large scale solar will give you much more renewable power. Utilities should have arranged for community solar instead of engaging in this net metering nonsense.

I think the best way forward for most Utility Companies is to require battery installs with solar installs. They could subsidize the cost of the battery to a certain % and have control over the system. This way they can utilize the energy locally whenever demand spikes and not need to install battery farms. Keep net metering and tired rates.

To give a rough idea of costs, U.S. electricity consumption is 3,913,000,000,000 kWh per year, or 10,720,547,945 kWh per day. Assuming 40% must be stored for evening demand, and with batteries priced at $145/kWh, that’s 10,720,547,945 * .4 * 145 = $622 billion dollars to shift the U.S. to renewable solar backed by battery storage. And that’s just the cost of the batteries. I suspect other options, like molten salt, flow batteries, and/or hydrogen, will offer cheaper renewable storage.

The economics won’t have to go there for a long time. Moody’s cited about $600/MWh values as where paying for storage can be economic in commercial demand-charge markets (like NYC). The other first-economies are in load balancing, and reliability, sort of like Tesla in Australia. They need a lot more than 129MWh of marginal grid supply (or 100MW). But the cost of going without Tesla’s solution can be measured in blackouts (which convert to a higher than $230/MWh price).

First economies for utility battery storage aren’t really measured in a “per MWh” price, when you think of the first purpose being frequency balancing, avoiding blackouts or those highest demand charge periods of the day (like commercial ~8AM starts/buildings).

The story is interesting because it gets into the moving parts. One of the biggest, I suspect, is how pissed off solar owners will pay beyond what is economic to get away from their utility. I’m talking about going from retail, down well below a nickel as some are getting kicked around (thinking AZ). What’s sorta scary, as KWh go behind the meter, is that all the utilities will see will be load contraction. Lower weather-adjusted demand. There will be “analyst” explanations, as if its a one-time thing, but it will be gone.

It’s an exciting topic, but frustrating that you can see how the actual U.S. generation pie will be increasingly in-accurate as un-metered renewables further peel back the 3.9k TWh run-rate of U.S. consumption. Renewables won’t get the credit they’re due.

As a Floridian, I wonder why the majority of Floridians vote for politicians that deny man made global warming? I guess Irma needs to hit a Republican majority county to beat some sense into global warming denying Floridians.

Wind goes low over huge areas for weeks, not just a night. Solar also goes low for several days when large cloud system cover large areas, and I don’t think the goal for solar is to just power A/C units.

Going all solar or even all renewable is a silly target. Let natural gas take 10-20% of the load and fill in the gaps, and keep the storage to a reasonable level.

40% maybe a little low. Be that as it may electric car batteries could be used to store a lot of the energy required. The real problem seems to be getting enough manufacturing committed to build the batteries.

Utilities are being forced to trade a kwh for a kwh. Not a problem, except that when I buy a kwh, I am paying for electrons AND grid, which makes sense. When utility trades, they are basically paying me for their use of grid, which is where issue is.
Instead, utility should pay us the average costs of that moment. IOW, when I produce in winter, that is pretty much baseload power, which is cheap. When produced in summer esp at say 5 pm, that is combination of baseload AND peakers. But it should not include grid.

To keep utility honest and competitive, other groups and companies should be allowed to buy the excess energy and sell it back on the grid. Iow, if solar City can pay me more, store it, pay for grid costs, and then sell it elsewhere ( different time ), it makes a good business.

Most importantly, we can slowly separate the true monopoly of grid from the power generation and storage.